How to Refinance a Mortgage and Save Money

Refinancing a mortgage can be an intimidating prospect. Understanding the jargon of mortgage refinance is hard enough. Figuring out if it's the right time for you to refinance your mortgage can be even harder. Then there are all those mortgage lenders. How exactly do you go about refinancing your mortgage, saving money in the process? The good news is that there can be many advantages to refinancing a mortgage. You just need to know where to look and what key steps to take. Read below to find out how to refinance a mortgage and save money.

Difficulty: Moderate

Instructions

Things You'll Need:

• Internet
• Mortgage papers
• Credit report

1. Understand the basic loan terms of your current mortgage. For example, do you have an adjustable rate mortgage or a fixed rate mortgage? What is your mortgage rate? How long have you made monthly payments to your mortgage lender? Additionally, knowing your current mortgage principal and interest balance is very important. If you are unsure about any details, contact your mortgage lender.

2. Figure out what penalties and fees you may be charged for getting out of your current mortgage. It may turn out that the amount of penalties and fees outweigh any cost savings you will get if you refinance a mortgage. If you have an FHA loan, a federal assistance loan from the Federal Housing Administration, know that you won't have to get a credit check, appraisal, or income check.

3. Know the costs of refinancing a mortgage. Mortgage lenders routinely charge loan fees, application fees, origination fees, loan processing fees, and closing costs when you refinance a mortgage. As with the penalties associated with getting out of your current mortgage, refinancing your mortgage may cost more than you will save with a newly refinanced mortgage.

4. Reappraise your home. Unless you have an FHA loan, you will need to reappraise your home in order to refinance a mortgage. For those who owe more on their home mortgage than their home is worth, refinancing will be difficult, if not impossible.

5. Check mortgage rates for different mortgage lenders. There are many websites available, which allow you to compare mortgage rates for different mortgage lenders and terms. Understand that these mortgage rates vary daily and depend on what type of mortgage you want.

6. Contact three or four mortgage lenders. These mortgage lenders should offer competitive mortgage refinancing rates. A general rule of thumb is that is refinancing a mortgage should decrease your mortgage rate by at least two percentage points in order for refinancing to make economic sense. This rule of thumb takes the costs of refinancing a mortgage into consideration, so be sure to run the numbers yourself as well.

7. Try to bargain with the mortgage lenders you contact. You may be surprised with what fees mortgage lenders will lower or waive if you just ask. When you refinance a mortgage, any bit of savings helps.

8. Prepare for a credit check. Having strong credit prior to refinancing a mortgage is extremely important, since your mortgage interest rate will depend on your credit score. You are entitled to a free credit report from each of the three credit bureaus each year.

9. Sign the mortgage refinancing papers with confidence. You put a lot of work into refinancing a mortgage and saving money.

Tips & Warnings

• Always read the terms of your new loan when refinancing a mortgage. Mortgage lenders may purposely or inadvertently leave out small details that turn into important details later on.

Resources

• Marilyn Brodeur

[suze100]

on 9/1/2009 Very useful and informative information, thanks guys.

[godfather25]

on 8/30/2009 These are helpful tips on refinancing a mortgage and saving money.

[sonni57]

on 8/30/2009 Thanks for the helpful refinancing info on mortgages.

[kristara]

on 8/30/2009 great mortgage refinancing info 5*